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Why Is Hewlett Packard Enterprise (HPE) Up 3.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Hewlett Packard Enterprise (HPE - Free Report) . Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hewlett Packard Enterprise due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hewlett Packard Enterprise reported fourth-quarter fiscal 2023 non-GAAP earnings of 52 cents per share, which came ahead of the Zacks Consensus Estimate by 4%. The reported figure was 9% lower than the year-ago quarter but up 6% sequentially. The bottom line also came at the higher end of management’s guided range of 48-52 cents.
Revenues of $7.35 billion decreased 7% (down 6% at constant currency [cc]) from the prior-year quarter’s level but increased 5% sequentially. The top line was in line with the Zacks Consensus Estimate and came at the midpoint of management’s guided range of $7.2-$7.5 billion. The annualized revenue run rate increased 39% year over year to $1.3 billion.
Hewlett Packard continued to witness the sustainable demand for its products and services during the quarter. Despite high inflationary pressure, macroeconomic headwinds and geopolitical issues, the company managed to report stronger-than-expected earnings and in-line revenues.
The top line benefited from exceptional performance in areas like Intelligent Edge, where revenues remained much closer to quarterly records, and HPE GreenLake, which continues to accelerate strategic pivot, generating higher recurring revenues and gross profit across four product segments, driven by the increased mix of high-margin software and services.
Segment Performance
Segment-wise, High-Performance Compute & Artificial Intelligence revenues increased 38% (up 38% at cc) year over year and 41% sequentially to $1.18 billion, mainly driven by the continued strength of AI demand. The segment’s operating margin came in at 4.7%, up 120 basis points (bps) year over year and 550 bps sequentially, mainly driven by the positive benefits of scale.
Revenues in the Intelligent Edge division increased 41% (up 40% at cc) year over year to $1.36 billion during the quarter but declined 4% sequentially. The robust year-over-year surge was primarily driven by the strong demand for its software-centric solutions, such as HP Aruba Central cloud management software and SASE security software suite. The division’s operating profit margin of 29.5% expanded 1,600 bps from the year-ago quarter’s level but contracted 20 bps sequentially.
Financial Service revenues increased 2% (flat at cc) from the prior-year period’s level to $876 million. Quarterly revenues were marginally higher than the previous quarter’s f of $873 million. The segment’s operating margin of 8.9% contracted 220 bps year over year but improved 50 bps sequentially. Net portfolio assets of $13.1 billion increased 4.3% year over year.
The Compute division’s sales declined 31% (down 30% at cc) year over year and 1% sequentially to $2.6 billion. The decrease in revenues from the year-ago quarter’s level reflects a tough year-over-year comparison. The division reported an operating profit margin of 9.8%, down 510 bps year over year and 110 bps sequentially.
Revenues from the Storage business came in at $1.11 billion but declined 13% (12% at cc) from the year-ago quarter’s level. However, the figure improved 3% sequentially. The division’s operating margin contracted 730 bps year over year and 260 bps sequentially to 8.1%.
Corporate Investments & Other revenues totaled $318 million, up 13% (12% at cc) year over year.
Operating Results
The non-GAAP gross profit increased 1.7% to $2.56 billion. Meanwhile, the non-GAAP margin expanded 170 basis points (bps) to 34.8%.
Hewlett Packard’s non-GAAP operating profit plunged 21.3% to $710 million, while the non-GAAP operating margin contracted 180 bps year over year to 9.7%.
Balance Sheet and Cash Flow
Hewlett Packard ended the fiscal fourth quarter with $4.27 billion in cash and cash equivalents compared with $2.91 billion at the end of the previous quarter.
In the fiscal fourth quarter, HPE generated $2.8 billion in cash for operational activities and $2.3 billion in free cash flow. During fiscal 2023, the company generated operating cash flow and free cash flow of $4.4 billion and $2.2 billion, respectively.
The company returned $1.04 billion to shareholders in fiscal 2023 by repurchasing $421 million worth of its common stock and $619 million in dividend payments in the reported quarter.
HPE announced that its board approved a quarterly cash dividend of 13 cents per share payable on Jan 11, 2024, to shareholders recorded as of Dec 13, 2023.
Guidance
Hewlett Packard initiated guidance for the first quarter and updated its outlook for fiscal 2024. The company expects to generate revenues between $6.9 billion and $7.3 billion in the fiscal first quarter. The company estimates GAAP and non-GAAP diluted net earnings per share (EPS) in the range of 24-32 cents and 42-50 cents, respectively.
For fiscal 2023, HPE reiterates its guidance for revenues and non-GAAP EPS. HPE continues to anticipate 2-4% constant currency growth in revenues for fiscal 2024. The company reaffirmed its non-GAAP EPS guided range of $1.82-$2.02 for fiscal 2024. However, it lowered its GAAP EPS guidance to $1.81-$2.01 from the earlier projected band of $1.83-$2.03.
For fiscal 2024, HPE anticipates operating profit growth on a GAAP and non-GAAP basis in the range of 15-21% and 3-5%, respectively. It also reiterates its projection for free cash flow in the $1.9-$2.1 billion range. Moreover, it intends to return approximately 65-75% of its fiscal 2024 free cash flow to shareholders through share repurchases and dividend payouts.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted -6.36% due to these changes.
VGM Scores
At this time, Hewlett Packard Enterprise has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Hewlett Packard Enterprise has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Hewlett Packard Enterprise (HPE) Up 3.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Hewlett Packard Enterprise (HPE - Free Report) . Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hewlett Packard Enterprise due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hewlett Packard Q4 Earnings Beat Estimates, Sales Meet
Hewlett Packard Enterprise reported fourth-quarter fiscal 2023 non-GAAP earnings of 52 cents per share, which came ahead of the Zacks Consensus Estimate by 4%. The reported figure was 9% lower than the year-ago quarter but up 6% sequentially. The bottom line also came at the higher end of management’s guided range of 48-52 cents.
Revenues of $7.35 billion decreased 7% (down 6% at constant currency [cc]) from the prior-year quarter’s level but increased 5% sequentially. The top line was in line with the Zacks Consensus Estimate and came at the midpoint of management’s guided range of $7.2-$7.5 billion. The annualized revenue run rate increased 39% year over year to $1.3 billion.
Hewlett Packard continued to witness the sustainable demand for its products and services during the quarter. Despite high inflationary pressure, macroeconomic headwinds and geopolitical issues, the company managed to report stronger-than-expected earnings and in-line revenues.
The top line benefited from exceptional performance in areas like Intelligent Edge, where revenues remained much closer to quarterly records, and HPE GreenLake, which continues to accelerate strategic pivot, generating higher recurring revenues and gross profit across four product segments, driven by the increased mix of high-margin software and services.
Segment Performance
Segment-wise, High-Performance Compute & Artificial Intelligence revenues increased 38% (up 38% at cc) year over year and 41% sequentially to $1.18 billion, mainly driven by the continued strength of AI demand. The segment’s operating margin came in at 4.7%, up 120 basis points (bps) year over year and 550 bps sequentially, mainly driven by the positive benefits of scale.
Revenues in the Intelligent Edge division increased 41% (up 40% at cc) year over year to $1.36 billion during the quarter but declined 4% sequentially. The robust year-over-year surge was primarily driven by the strong demand for its software-centric solutions, such as HP Aruba Central cloud management software and SASE security software suite. The division’s operating profit margin of 29.5% expanded 1,600 bps from the year-ago quarter’s level but contracted 20 bps sequentially.
Financial Service revenues increased 2% (flat at cc) from the prior-year period’s level to $876 million. Quarterly revenues were marginally higher than the previous quarter’s f of $873 million. The segment’s operating margin of 8.9% contracted 220 bps year over year but improved 50 bps sequentially. Net portfolio assets of $13.1 billion increased 4.3% year over year.
The Compute division’s sales declined 31% (down 30% at cc) year over year and 1% sequentially to $2.6 billion. The decrease in revenues from the year-ago quarter’s level reflects a tough year-over-year comparison. The division reported an operating profit margin of 9.8%, down 510 bps year over year and 110 bps sequentially.
Revenues from the Storage business came in at $1.11 billion but declined 13% (12% at cc) from the year-ago quarter’s level. However, the figure improved 3% sequentially. The division’s operating margin contracted 730 bps year over year and 260 bps sequentially to 8.1%.
Corporate Investments & Other revenues totaled $318 million, up 13% (12% at cc) year over year.
Operating Results
The non-GAAP gross profit increased 1.7% to $2.56 billion. Meanwhile, the non-GAAP margin expanded 170 basis points (bps) to 34.8%.
Hewlett Packard’s non-GAAP operating profit plunged 21.3% to $710 million, while the non-GAAP operating margin contracted 180 bps year over year to 9.7%.
Balance Sheet and Cash Flow
Hewlett Packard ended the fiscal fourth quarter with $4.27 billion in cash and cash equivalents compared with $2.91 billion at the end of the previous quarter.
In the fiscal fourth quarter, HPE generated $2.8 billion in cash for operational activities and $2.3 billion in free cash flow. During fiscal 2023, the company generated operating cash flow and free cash flow of $4.4 billion and $2.2 billion, respectively.
The company returned $1.04 billion to shareholders in fiscal 2023 by repurchasing $421 million worth of its common stock and $619 million in dividend payments in the reported quarter.
HPE announced that its board approved a quarterly cash dividend of 13 cents per share payable on Jan 11, 2024, to shareholders recorded as of Dec 13, 2023.
Guidance
Hewlett Packard initiated guidance for the first quarter and updated its outlook for fiscal 2024. The company expects to generate revenues between $6.9 billion and $7.3 billion in the fiscal first quarter. The company estimates GAAP and non-GAAP diluted net earnings per share (EPS) in the range of 24-32 cents and 42-50 cents, respectively.
For fiscal 2023, HPE reiterates its guidance for revenues and non-GAAP EPS. HPE continues to anticipate 2-4% constant currency growth in revenues for fiscal 2024. The company reaffirmed its non-GAAP EPS guided range of $1.82-$2.02 for fiscal 2024. However, it lowered its GAAP EPS guidance to $1.81-$2.01 from the earlier projected band of $1.83-$2.03.
For fiscal 2024, HPE anticipates operating profit growth on a GAAP and non-GAAP basis in the range of 15-21% and 3-5%, respectively. It also reiterates its projection for free cash flow in the $1.9-$2.1 billion range. Moreover, it intends to return approximately 65-75% of its fiscal 2024 free cash flow to shareholders through share repurchases and dividend payouts.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted -6.36% due to these changes.
VGM Scores
At this time, Hewlett Packard Enterprise has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Hewlett Packard Enterprise has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.